Maintain ‘buy’ on Power Grid, target Rs 191

Power Grid Corporation of India’s (PGCIL) Q3FY16 adjusted PAT of R15.7 billion was ahead of our/consensus R15.3/15 billion estimates. The company commissioned projects worth R170 billion (R110 billion estimate), while capex was steady at R45 billion during the quarter. Telecom and consultancy division’s EBIT at R1.1 billion was in line with expectations.

The sharp uptick in commissioning was due to the R95 billion worth Bishwanath Chariali HVDC Line getting operational in November 2015, which has been funded via 80:20 D/E to reduce tariffs and conserve equity for other projects. Rolling over to FY18E, we have revised our target price to R191 (R177 earlier). Maintain ‘buy’.

Standalone PAT came in at R16.1 billion, which included prior period income of R469 million. Commissioning was sharply higher at R172 billion (R268 billion YTD) including the R95 billion North East HVDC line. Margins across business lines reported slight uptick, leading to adjusted PAT being ahead of estimates. The company incurred capex of R45 billion during the quarter (R160 billion till date), in line with its FY16 target of R225 billion.